Chinese PBOC Cuts Benchmark Rate First Time Since Peak of Pandemic

China in an unexpected move has cut down key interest rate since the peak of the pandemic in 2020 amid liquidity crunch in the property market and renewed outbreaks of COVID-19 in parts of the country.

The People’s Bank of China (PBOC) cut the rate on its one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.85 per cent. This marks the first reduction since April 2020. Seven-day reverse repurchase agreements was cut by the same magnitude to 2.1 per cent.

The central bank made the move while offering 700 billion yuan (S$148.5 billion) via the MLF, exceeding the 500 billion yuan coming due. It added 100 billion yuan with seven-day reverse repurchase agreements.